Market commentary

Initial jobless claims for the week ending February 26 surprised the markets today by dropping more than expected from 388,000 to 368,000. The four-week moving average has fallen to 388,000, finally below the 400,000 number.

More positive news came from the Institute for Supply Management’s index of non- manufacturing businesses which increased to 59.7 from 59.4 in January. This is the highest level since August 2005 and suggests the U.S. economic recovery may be expanding from the manufacturing into the service sector.

Before we too excited let’s recall crude oil rose above $102.00 in Wednesday’s New York trading and remains in triple digits this morning. The longer oil prices remain elevated, the more likely that the spike will result in dampened U.S. economic growth. According to the Department of Energy average prices for a gallon of gasoline have risen $0.32 in 2011 and $0.69 from October 2010. This is a real tax on the American consumer and not to mention we are sending billions of additional dollars overseas.

Speaking of oil, a resolution in the Middle East or a positive payroll report on Friday, which appears likely to occur, could quickly reverse the recent strength in Treasuries. The improved jobless claims report sent yields on the 10-year from 3.48% up to 3.56% and has worsened mortgage prices by .25% to .375%.